Economic Sector

Last updated: Wednesday, February 21, 2018

Nearly 2,000 Business Conditions, Requirements Asked for Eradication

Posted: Tuesday, September 05, 2017

As directed by the Prime Minister on assessment of regulations on investment and business conditions, the Ministry of Planning and Investment has recently reported to the Prime Minister on the current status of business and investment conditions in Vietnam.

243 sectors, 4,284 business requirements and conditions Accordingly, the current total number of business requirements and conditions is about 4,284, applicable to 243 sectors. In addition, 19 commodities and five services are prohibited from business; seven commodities and one service are restricted from business; and 92 types of commodities and services are subject to conditional business; and 20 types of goods and services are State monopolistic. According to the Ministry of Planning and Investment, these figures were updated on August 10, 2017 and were not the finals.

Business conditions are defined and governed by 237 legal documents, including 66 laws, three ordinances, 162 decrees and six agreements. Currently, 15 ministries have regulations on business conditions, with the Ministry of Industry and Trade holding the most with 1,152 conditions and the Ministry of Justice holding the least with just 64 conditions.

Integrated data from the Ministry of Planning and Investment show that there are now eight groups of business requirements and conditions: (1) Must be organised under a certain legal form; (2) Personnel and labour requirements; (3) Production capacity requirements; (4) production organisation requirements; (5) Minimum financial capacity requirements; (6) Must be compliant with planning; (7) Must be trained and practiced by State agencies; and (8) Must be approved by State agencies for doing business.

According to the Ministry of Planning and Investment, business conditions are governed by so many different documents, which are very diverse, complex and overlapping in scope of administration. The system of regulations on conditional business requirements is changeable or hard to track and update in an accurate and timely manner due to the complex structure and a large number of regulations on business conditions, including many without clear definition, which results in different interpretations and red tapes in State agencies and cause enterprises to spend more on this.

Methods of reviewing and reducing business conditions needed to be changedDr Nguyen Dinh Cung, President of the Central Institute for Economic Management (CIEM), said that the method of reviewing and reducing business conditions is currently chosen by ministries and agencies themselves. The performance will depend on their attitudes, actions and approaches among other things. This is hardly practical. Therefore, the outcome of reviewing and reforming business conditions usually fails to come up with the objectives of the Government and the expectations of enterprises.

For that reason, the Ministry of Planning and Investment proposed getting rid of 1,930 business conditions seen as sublicences that currently impede legitimate business operations of enterprises. Specifically, the ministry suggested abolish all or a part of 302 financial conditions, all 85 location conditions, 1,336 production capacity conditions, 127 business method conditions and 80 planning conditions. In addition, as for other business conditions relating to human resources (except for those requiring professions, expertise and experience like medicine and auditing) and other inappropriate contents, the ministry recommends abolishing the entirety or partiality.

According to the ministry, current regulations on business conditions have become clearer and more transparent. However, this system is still somewhat unreasonable. Many regulations bring about unreasonable barriers to investment and market entry - a hindrance to new corporate establishments. They also cause high operational risks, damp their innovation aspirations, and reduce productivity and competitiveness of the business and the economy. “Compared to OECD standards, the quality of business institutions in Vietnam is still low,” the ministry stated.

Therefore, in this report, the Ministry of Planning and Investment proposed changing the way of administering business towards OECD standards and practices: Replacing preconditions with technical safety standards and regulations with clear, detailed guidelines; changing from pre-examination to post-examination, allowing enterprises to self-test their products and announce standard conformity while State agencies just perform random tests to ensure compliance and conformity; applying technology to production to manage risks to improve performance and reduce costs.